Transcript of "Cloud computing market in key emering countries"

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Global IT spending is springing back after a decline last year with a strong push from BRICSS markets<br />1<br />IT Spend Growth Trend by Regions/ Countries, 2010, In Constant Currency<br /><ul><li>Emerging markets such as Brazil, Russia, India, China, South Africa & South Korea (BRICSS) have shown tremendous growth in the IT investments over the last 12 months

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BRIC countries have been growing faster compared to others for the last few years primarily owing to faster growth of user industries in these markets</li></ul>Source: Zinnov Research<br />

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Products for community/ group succeed for cost reason</li></ul>Poor Infrastructure<br />Weak Distribution Network<br />4<br />6<br /><ul><li>Limitations of climate, infrastructure and resources such as power

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The cloud market in BRICSS nation is slowly starting to come out of the nascent stages<br />5<br />Evolution of Public Cloud Spending (US$ Million) in BRICSS Nations 2008-2011E<br />Country Wise Share of Public Cloud Spending in 2010<br />$688.0<br />$457.4<br />$310.8<br />SaaS<br /><ul><li>Small and medium businesses are a key focus area for majority of the players looking to scale in BRICSS

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The key SaaS adopting verticals in BRICSS are Telecom, Financial services, Government, Manufacturing, etc.</li></ul>PaaS<br /><ul><li>The PaaS/ Platform ecosystem in BRICSS is still in its early stages with very less local company participation

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Most of the local developers leverage global platform providers such as Force.com, Google, Azure etc in the current landscape</li></ul>IaaS<br /><ul><li>The IaaS & Hosting ecosystem in BRICSS is very nascent. The hosting market is completely dominated by the state run telecom companies and has very few small or mid-sized hosting providers</li></ul>Source: Zinnov interactions with stakeholders across the cloud computing stack across geographies<br />

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The BRICSS cloud ecosystem plays host to a lot of global companies across the cloud computing stack who are increasingly focusing on these markets<br />6<br />Illustrative List of Key Players (non-exhaustive)<br /><ul><li>Salesforce.com

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The future of cloud market in BRICSS countries is very strong with growth rates well over 25% for the next 5 years<br />8<br />Growth of Public Cloud Spending in BRICSS Nations 2010-2015E<br />$3,480.8<br />CAGR = 38.3%<br /><ul><li>Current cloud budget of enterprises in BRICSS countries is less than 50% of the budget of developed nations such as US & Western European countries

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More than 50% of enterprises/ SMBs in India & China are looking to increase the IT investments over the next year

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Private cloud opportunity in the immediate future to be significantly larger because of concerns around SLAs, data security and latency

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Cloud vendors across the stack would be investing heavily to address some of the challenges on demand side</li></ul>$688.0<br />Source:<br />

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BRICSS ICT ecosystem is continuously improving on multiple fronts which is enabling increased adoption of cloud services<br />9<br />Governments in BRICSS are extremely active participants in the Cloud ecosystem<br /><ul><li>The government is actively promoting cloud computing through construction of various testbeds and the launch of multiple cloud service initiatives such as e-governance, cloud grids etc.</li></ul>1<br />Telecom Service Providers are aggressively focusing on the cloud opportunity<br /><ul><li>With fast growing subscriber base and declining Average Revenue Per User (ARPU), the Telecom Service Providers (TSPs) are looking at targeting the cloud computing opportunity</li></ul>2<br />Internet Infrastructure is increasingly gaining traction in BRICSS<br /><ul><li>The penetration of broadband and 3G is building a promising opportunity for cloud solutions in the BRICSS nations</li></ul>3<br />Large base of cost sensitive small & medium enterprises looking for IT adoption<br /><ul><li>A large base of SMBs (closed to 100 million in BRICSS nations alone) are looking to enhance the global competitiveness by increasing use of IT</li></ul>4<br />Source: Zinnov Analysis<br />

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Government is making headway into the cloud computing space by conducting various awareness programs for its IT departments

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UID Authority is creating a platform (identify, authentication and payment) onto which they would like to get solution providers and startups</li></ul>India<br /><ul><li>Stimulus package of US$ 39 Bn to positively impact the IT spending of various industry verticals

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Advanced public service agencies such as SARS are running cloud based technologies in their environments

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The Department of Home Affairs (DHA) has announced that it will spend more than SAR500 Mn on IT projects in the current financial year</li></ul>South Africa<br /><ul><li>Government is trying to diversify the Russian economy by reducing its dependence on oil and gas exports. It has made developing hi-tech sectors and encouraging research the focal point of the economic agenda

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Government is currently developing a modern center for R&D near Moscow and the first innovation project is a cloud computing based project worth US$29 million</li></ul>Russia<br /><ul><li>Huge investments in the national broadband plan to triple access to broadband services by 2014

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Similar to India’s UID project, the government of Brazil has a civil digital identification project with projected investments of approximately US$800mn

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As a part of its ongoing Growth Acceleration Plan – 2, the government plans to spend US$23 billion on science and technology with a focus on cloud computing</li></ul>Brazil<br />Source: Zinnov analysis of Government’s Policy Updates; Official press releases by Ministry of IT<br />

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BRICSS nations are jumping the technology curve – moving directly to wireless instead of wire line. Aggressive focus by government in BRICSS to build the 3G infrastructure</li></ul>Source: Zinnov Analysis of Statistics from Telecom Providers in Each Country<br />

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Rapid growth of internet users provide promising opportunities for cloud based solutions in the BRICSS nations<br />13<br />Internet Users in BRICSS Nations (Millions)<br /><ul><li>BRICSS nations are witnessing a rapid penetration of internet over the last 5 years – Government & industry are aggressively focusing on providing internet in rural areas as well

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Newer form factors such as mobile devices, touch pads & net books are slowly giving way to the desktops & laptops in these markets </li></ul>Source: Zinnov Analysis of Statistics from Internet services Providers in Each Country; Zinnov research<br />

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Small & mid sized businesses (SMBs) form an important part of the economy in these countries and present a huge opportunity for cloud adoption<br />14<br />Small & Medium Sized Businesses (SMBs) in BRICSS (Millions)<br /><ul><li>Large base of small & medium enterprises – close to 100 million in BRICSS nations

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SMBs account for close to 40% of exports and output in both India & China; accounts for 97% of the total enterprises in the country

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While SMBs are slowly gearing up towards IT adoption to enhance competitiveness, cost constraints and lack of budget planning are the restraints to IT adoption</li></ul>Source: World bank; Zinnov research<br />

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While the ecosystem is evolving, BRICSS nations by the virtue of large size, distributed SMB base and highly localized requirements poses unique challenges to cloud providers<br /><ul><li>Majority of the global cloud companies selling in BRICSS are offering the services at the global price points, with the exception of a few players

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The global price points significantly overshoot the buying power of enterprises in BRICSS

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Most of the Cloud services firms operating in BRICSS are aggressively SMB focused and they lack the sales bandwidth to effectively cater to the large base SMBs distributed across the country

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Most of the sales efforts of the companies are focused toward the metro areas</li></ul>15<br />Cloud Service Provider Challenges in BRICSS Countries<br />Lack of Scale<br />Pricing<br />ProductLocalization<br />ResellerLeverage<br /><ul><li>Due to the lack of in-house sales bandwidth, companies are increasingly relying on reseller partnerships

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Majority of the companies do not have a clearly defined reseller strategy to cater to the market. In many cases the reseller is also engaged in promotion of a competing cloud or on-premise product which also hampers the adoption

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Low proliferation of English and regional dialects hamper the adoption

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Also, the nature of business in BRICSS is predominantly relationship based

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The cloud products/ services do not account for these nuances which impact their uptake</li></ul>Source: Zinnov analysis of Interviews with multiple senior stakeholders from the cloud ecosystem<br />

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From the demand perspective – Security and Integration are the top concerns with using public cloud services<br />16<br />Public Cloud Service Concerns of CIOs, 2010<br /><ul><li>The CIO organizations are more cautious about data confidentiality & security

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There is a strong skepticism around business continuity for cloud deployments

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The seamless integration is crucial for leveraging cloud technology to the maximum. In the current scenario, the compatibility issues hinder the integration

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The loss of control on the business processes is another concern which slows down the cloud adoption

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The cloud computing market is in nascent stage. The ecosystem of academia, enterprises and government is essential to facilitate the cloud adoption

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There is lack of service level agreements and guarantees by the providers which adds to the user skepticism

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The regulations and policies are not very well defined. Also, the industry lacks standardization frameworks

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More clear regulations are needed to increase service providers’ accountability to gain consumer trust

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The government poses stringent regulations and auditing requirements in some of the BRICSS countries. This makes the potential customers hesitant and inhibits the cloud adoption</li></ul>Source: Zinnov analysis of Interviews with multiple senior stakeholders from the cloud ecosystem<br />

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Zinnov Management Consulting Pvt. Ltd<br />Zinnov | 3<br />Zinnov prides itself on having grown over the last 7 years through a commitment to excellence<br /><ul><li>Started in 2002 with a focus on helping technology organizations globalize their operations

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Zinnov Management Consulting Pvt. Ltd<br />Zinnov | 22<br />Zinnov has been at the forefront of driving thought leadership around ‘Cloud Computing’ in Asia Pacific<br />Zinnov conducted the first ever comprehensive study on the SaaS Market in India. The report not just gave insights on customer needs, market size and key market players, but also provided insights on drivers for the market over the next 5 years <br />India SaaS Market Report<br />Cloud-The way forward<br />Cloud- The APAC Story<br />Zinnov is currently executing a syndicated study on the APAC Market for Cloud based solutions and the report will be released in the next 2 months and will be one of only two comprehensive reports to be published on this market<br />The way forward report on cloud published by Zinnov has been widely acknowledged as one of the most easy to read and well articulated reports on how cloud is a perfect storm that could dramatically change the business landscape in India<br />Thought Leadership<br />